By Chris Farrell, Next Avenue Contributor
The financial foundation of retirement income for all but societys wealthiest sliver is Social Security. But if your parent or another loved one has dementia, how can you ensure those Social Security benefits be managed properly? Turns out, the Social Security Administration has a little-known program to help.
Congress first authorized Social Security to deal with this problem in 1939, giving the agency authority to appoint what are called representative payees for beneficiaries incapable of managing the income; the payees are not government employees. (A 2004 law updated the program to better protect recipients.)
The Social Security Representative Payee Program
Once a Representative Payee is designated, that person is required to decide how to spend a beneficiarys Social Security income and to keep records of that spending. The task isnt easy, either. Just as its hard for adult children to take away their parents car keys, its a tough call for a Social Security staffer to remove a beneficiarys control over his or her Social Security finances.
Representative Payee can be a wonderful tool particularly for a person whose assets are only Social Security benefits, says Marit Anne Peterson, program director at the Minnesota Elder Justice Center in St. Paul, Minn.
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Most of the 5.5 million participants in Social Securitys Representative Payee Program are children and disabled adults, but roughly 500,000 beneficiaries in retirement also have representative payees.
Few Know of This Program
A half million retirees seems like a big number, doesnt it? But the figure amounts to only 1.5% of retirees. Yet scholars estimate that 10% or so of retirees have dementia, according to Geoffrey Sanzenbacher and Anek Belbase of the Center for Retirement Research at Boston College, who recently published a study on the Representative Payee Program. I heard them talk about it at the Retirement Research Consortium in Washington, D.C., in August.
People dont know about the Representative Payee program, said Sanzenbacher. Its one reason they dont use it more.
Sanzenbacher and Belbase wondered whether policymakers and society should be worried about the disparity. Does the gap signal that a large portion of those with dementia are mismanaging their Social Security money, let alone may be subject to abuse and misappropriation of funds?
Who Manages Finances for Those With Dementia?
Thankfully, their study of more than 7,000 Medicare enrollees is mostly reassuring.
Family members are stepping up and helping their parents with dementia much of the time, reducing the need for the Representative Payees to assist. Over 85% of those with established dementia, the researchers found, are receiving help with simple and complex money matters.
Although earlier research showed most people do not use a Representative Payee, most do seem to have help available both for their simple banking matters and more complex money management, they wrote in their paper, Dementia, Help with Financial Management, and Financial Well-Being. Perhaps just as important, the study suggests that those with established dementia and help available are faring as well as those without any cognitive impairment.
When a Parent With Dementia Lives Far Away
The Representative Payee program, however, can be nearly a godsend for boomers and Gen Xers who dont live near their parents with dementia and therefore have difficulties managing their money.
Sanzenbacher told me: I would think of Representative Payee as a very useful tool for people who cant be around their family member.
When Family Members Step In
Often, these days, loved ones are able to step in and take over the financial management for people with dementia. Take the case of Tim Heaney, who had long managed his familys finances, a subject area he was familiar with as head of corporate finance and securities law at Fredrikson & Byron, the Minneapolis-headquartered business law firm. But four years ago, Heaney was diagnosed with early dementia he has Lewy body dementia, a disease often misdiagnosed as Alzheimers. These days, Roberta Hunt, his wife and faculty emeritus in the department of nursing at St. Catherines University, manages their money.
I gradually took over the finances. We set it up early, Hunt says. Still, she adds, the process of dealing with financial issues in these situations is complex.
The Power of Power of Attorney
Families use a variety of legal and financial techniques to take over household finances when loved ones with dementia cant. The legal linchpin is durable power of attorney, which grants the designated person the authority to make legal and financial decisions for the person with dementia. (The Alzheimers Association offers a broad overview of the financial and legal considerations on its website.
Shirley Holten Klitzke, of the Twin Cities area, got that to help manage the finances of her 87-year-old widowed mother with mild cognitive impairment. It upsets her to have to do anything with money, says Klitzke. She willingly signed the paperwork about power of attorney several years ago.
Concerns About the Representative Payee Program
Despite the heartening results from the Sanzenbacher/Belbase study, there are several reasons for concern about Social Securitys Representative Payee program and the financial challenge it highlights.
For one thing, the need for finding better financial support is pressing, with widespread predictions that dementia will become increasingly commonplace as the population ages and people live longer, on average.
For another, the Representative Payee program must figure out how to do more to help the most vulnerable segments of elderly Americans. Sanzenbacher and Belbase discovered that 15% of older Americans with dementia and without family help appeared to be significantly worse off than those with dementia and assistance. Theyre nearly twice as likely as their peers without dementia to have difficulties paying for food, rent, utilities and medicine.
Finally, and sadly, the Social Security Administration is struggling to effectively administer the Representative Payee program. The agencys frontline staff is undertrained and underfunded to make the kind of difficult judgments the program calls for. The agency needs more resources to develop better protocols and improve its ability to evaluate potential applicants, according to a 2013 Government Accountability Office report.
A common complaint about the program is its paperwork requirements. Social Security requires Representative Payees file annual reports detailing every expenditure with the beneficiarys funds during the previous year.
What Families Need
The reassuring results of the Sanzenbacher and Belbase study also emphasize the biggest cause for concern: How much society is relying on families to take care of those with memory loss, including the difficult task of managing their finances.
For family caregivers, the financial and emotional toll of dealing with dementia is steep. The people with dementia may be better off with a family member, but clearly the family member is worse off, says Joseph Gaugler, long-term care professor of nursing at the University of Minnesota. We clearly rely very heavily on families to provide extreme support. How long can we rely on this system?
In other words, how long can we rely on people like Shirley Holten Klitzke? Last November, to make time for caregiving of her mother, Klitzke had to reduce her hours as a special education instructor at a public charter school and take a 40% pay cut.
Klitzkes siblings have chipped in to pay her a stipend that helps offset her salary cut. But many people dont have such strong family ties or, even if they do, the financial resources to step in and help out.
If you have a parent or loved one with dementia, you may want to check into the Social Security Representative Payee program. Or try to automate the persons finances as much as possible, through direct deposit and automatic bill paying so some income and expenses are handled seamlessly. Then, if you can, check that persons bank, credit card, brokerage and mutual fund statements to be sure everything is on track.
Social Securitys Representative Payee program is useful. But society needs to do much more to help families manage the finances of their loved ones with dementia.